Bangladesh–US Zero-Tariff Clause Erodes India’s Textile Edge in American Market

Bangladesh’s new trade deal with the United States, which includes a mechanism for zero-tariff access on select garments and textiles made with US-origin inputs, threatens to chip away at India’s recent tariff advantage in the American market. Under the pact, the overall reciprocal tariff on Bangladeshi exports to the US has been cut to 19% from 20%, with an additional provision that allows a to‑be‑specified volume of apparel and textile goods from Bangladesh to enter at a zero reciprocal tariff rate if they use US-produced cotton or man-made fibre.

For India, the concern is two-fold: the narrow tariff edge it gained after its own trade understanding with Washington has been diluted, and Bangladesh could now regain a structural pricing advantage in key apparel categories, particularly basic garments where margins are razor-thin. Business analysts warn that US buyers, highly sensitive to small differences in landed costs, may increasingly shift volume orders towards Bangladesh as zero-duty eligible product lines ramp up, especially given its lower labour and manufacturing costs.

The detailed contours of the concession are still unclear — including which HS lines will qualify, how big the zero-duty quota will be, and when it becomes fully operational — but even the expectation of cheaper Bangladeshi shipments has already rattled Indian textile and apparel exporters. Reports indicate some US buyers have paused fresh orders or asked Indian suppliers to absorb part of the tariff burden to remain competitive against potential Bangladeshi offerings.

There are, however, limiting factors that could blunt the full impact: the zero-tariff facility is conditional on Bangladesh using US-origin textile inputs, which may raise sourcing costs or reduce flexibility for its manufacturers. Capacity constraints, infrastructure bottlenecks and higher lead times in Bangladesh, along with India’s strengths in integrated yarn–fabric–garment supply chains and a wider product mix, may help Indian exporters retain share in higher-value or more complex segments.

Industry bodies in India are urging the government to respond by fast-tracking refund and incentive mechanisms, exploring deeper market access with the US, and supporting upgrading and diversification into value-added, synthetic and technical textiles to offset the emerging disadvantage in basic cotton garments. Without such measures, they fear that the US–Bangladesh deal could gradually erode India’s textile export growth momentum in its single-largest apparel market.